Lafarge - May 2014

Lafarge's first-quarter turnover declined by 1.6 per cent to EUR2633m under IFRS11 and by 0.4 per cent to EUR3136m under the accounting method previously used. The EBITDA edged ahead by 0.3 per cent to EUR343m under IFRS11 but improved by 4.7 per cent to EUR3980m under the previously applied accounting rules. The running profit under the new rules show a 14.6 per cent increase to EUR146m, while under the previously applied rules there would have been a 30.6 per cent rise to EUR162m, helped by a 7.9 per cent reduction in the depreciation charge. The main negative effect of IFRS11 is the exclusion of joint ventures, notably in the UK, Morocco and China. Net financial costs were reduced by 4.5 per cent to EUR232m and the pretax loss was reduced by 25.7 per cent to EUR101m, but the net attributable loss rose by 15.4 per cent to EUR135m. Net debt at the end of March was 1.1 per cent lower at an adjusted EUR9951m, giving a gearing level of 69.9 per cent. Development capital expenditure in the period was reduced by 18.2 per cent to EUR184m, but maintenance capital spending increased by 12.5 per cent to EUR54m.

Cement deliveries in the quarter rose by eight per cent to 31Mt, or by 8.4 per cent to 25.9Mt excluding joint ventures, to give a turnover from cement of EUR1983m and a corresponding EBITDA of EUR364m. The aggregates tonnage was 1.2 per cent higher at 33.3Mt, or +1.9 per cent to 26.9Mt under IFRS 11on a turnover 1.5 per cent lower at EUR334m, but the EBITDA loss was reduced by 39.3 per cent to EUR17m. The ready-mixed concrete volume declined by 0.1Mm³ to 6.6Mm³, or to 5.7Mm³ on IFRS 11 to produce a turnover, including concrete products, 5.6 per cent lower at EUR502m and the EBITDA was a negative EUR2m compared with a EUR5m profit.

The Middle East and Africa produced a turnover 6.6 per cent ahead at EUR893m and the EBITDA rose by 15.2 per cent to EUR250m, which represented 72.9 per cent of the group total. Cement turnover accounted for 90.6 per cent the regional total, or EUR809m, and the EBITDA amounted to EUR245m as cement deliveries rose by 15.4 per cent to 10.5Mt. Aggregates shipments were some 24 per cent higher at 2.4Mt, while ready-mixed concrete deliveries advanced by some 12 per cent to 1.3Mm³. Domestic cement deliveries in Egypt recovered by 17.1 per cent and the dependence on gas supplies was further reduced and it is hoped to start using petcoke shortly. Algerian cement shipments, which were affected by a strike last year, staged a 24.1 per cent recovery, also helped by additional grinding capacity. In Morocco, which is no longer consolidated, shipments declined by 3.5 per cent, but prices showed a further recovery. In Iraq, volumes rose by 12.5 per cent, but prices were depressed by imports. Nigerian volumes rose by 11.9 per cent with prices generally improving, while Kenyan volumes improved by 10.3 per cent. In South Africa, heavy rain depressed cement volumes which declined by nine per cent and ready-mixed concrete deliveries fell by 12.1 per cent, but aggregates deliveries did rise by 18 per cent.

The consolidated European turnover recovered by 7.8 per cent to EUR676m, with the cement turnover accounting for EUR399m, and the EBITDA being back in positive territory with a EUR22m profit, of which EUR11m came from cement. The eastern European winter loss was just over halved to EUR17m. Cement shipments recovered by 12.5 per cent to 4.5Mt. French cement volumes declined by 1.2 per cent, while the now de-consolidated British cement shipments rose by a further 5.5 per cent. Spanish volumes did improve by 14.4 per cent in the period and in Greece there was a 26.4 per cent volume recovery. In Poland, the milder winter led to a 49.8 per cent recovery in cement volumes on broadly stable prices, while in Romania volumes recovered by 37.4 per cent. Russian volumes, on the other hand, were off by 2.6 per cent. Downstream, French volumes recovered by 11.2 per cent in aggregates but eased by 0.9 per cent in ready-mixed concrete, while the British volumes rose by 8.8 per cent in aggregates and by 11.5 per cent in concrete. Polish aggregates shipments staged a 34.5 per cent recovery.

Asian turnover declined by 7.5 per cent to EUR515m, largely reflecting exchange rates, and the EBITDA fell by 17.4 per cent to EUR95m. The Asian cement turnover amounted to EUR462m and the EBITDA to EUR95m, with cement shipments being some seven per cent higher at 7.5Mt. The Chinese associate managed to increase volumes by 3.6 per cent, but prices remained under pressure. After a weak start to the year, Philippine cement deliveries picked up in March and cement sales rose by three per cent. Malaysian cement deliveries were ahead by 0.4 per cent and prices firmed up, while Indonesian volumes were 10 per cent higher. Thanks to the new 2.6Mta Rajasthan works, Indian volumes increased by 23.7 per cent, but ready-mixed concrete deliveries fell by 23.8 per cent. South Korean cement volumes registered a further 2.1 per cent decline, but prices were stable.

The North American turnover came down by 13.6 per cent to EUR376m of which cement accounted for EUR169m, a 7.7 per cent reduction that turned last year's EUR5m cement profit at the EBITDA level into a EUR24m loss. Cement shipments suffered from a bad winter that led to higher transport costs and somewhat lower shipments at 1.5Mt. Cement deliveries were off by 0.2 per cent in the USA and by 0.7 per cent in Canada. The North American aggregates volume declined by 14.9 per cent to 10.3Mt and the turnover was 1.5 per cent lower at EUR334m, with pure aggregates accounting for EUR119m, as deliveries were reduced by 12.6 per cent in the USA and by 3.3 per cent in Canada. Ready-mixed concrete deliveries fell by 14.9 per cent in the USA and by 10.4 per cent in Canada, giving a 13 per cent volume reduction to 0.8Mm³ while the turnover fell by 28.3 per cent to EUR104m, but for the year volumes are expected to show a good advance.

The Latin American turnover declined by 20.6 per cent to EUR173m, reflecting disposals and a weaker Brazilian currency. The EBITDA came off by a quarter to EUR38m. The cement turnover fell by 25.5 per cent to EUR146m and the EBITDA emerged 28.8 per cent lower at EUR37m. Cement deliveries were down by some 15 per cent to 1.9Mt, but aggregates shipments rose by 20 per cent to 0.6Mt and ready-mixed concrete deliveries advanced by one-third to 0.3Mm³. In Brazil, volumes did improve by 6.3 per cent, with prices showing some improvement. A new grinding centre near Rio de Janeiro was commissioned during March. In Ecuador volumes improved by 3.2 per cent and turnover rose by five per cent.

In Russia, Lafarge and minority shareholder EBRD have inaugurated the 2Mta integrated cement works at Ferzikovo in the Kaluga region. This works is intended to supply the Moscow region and employs a staff of 200. By 2020, it is anticipated that this works will be burning up to 45 per cent alternative fuels. Currently producing just CEM I, it is expected to add various types of CEM II next year.

Lafarge has agreed the sale of its 1.4Mta integrated cement works in Ecuador to Union Andina de Cementos (Unacem) for US$553m (EUR405m) to reduce its debt. Unacem is the leading cement producer in Peru and also owns Drake Cement in Arizona that has a capacity of 0.6Mta. Unacem was formed in 2012 through the merger of Cementos Lima and Cemento Andino.